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Hofstra University, Department of Global Studies & Geography GEOG 113C – Geography of East and Southeast Asia Professor: Dr. Jean-Paul Rodrigue Topic 3.

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Presentation on theme: "Hofstra University, Department of Global Studies & Geography GEOG 113C – Geography of East and Southeast Asia Professor: Dr. Jean-Paul Rodrigue Topic 3."— Presentation transcript:

1 Hofstra University, Department of Global Studies & Geography GEOG 113C – Geography of East and Southeast Asia Professor: Dr. Jean-Paul Rodrigue Topic 3 – Pacific Asian Economy and Society A – The Social Landscape B – Pacific Asian Development

2 © Dr. Jean-Paul Rodrigue Conditions of Usage ■ For personal and classroom use only Excludes any other form of communication such as conference presentations, published reports and papers. ■ No modification and redistribution permitted Cannot be published, in whole or in part, in any form (printed or electronic) and on any media without consent. ■ Citation Dr. Jean-Paul Rodrigue, Dept. of Global Studies & Geography, Hofstra University.

3 © Dr. Jean-Paul Rodrigue A. THE SOCIAL LANDSCAPE 1. Religions What are the major religions of Pacific Asia? 2. Rice What is the economic and cultural importance of rice? 3. Demography What are the major demographic characteristics and issues of the region? 4. Social Problems What are the major regional social problems? 5. Urbanization What is the extent of urbanization?

4 © Dr. Jean-Paul Rodrigue 1. Religions ■ Religions Influence culture and behavior. ■ Religious hearths 4 of the world’s most important religions originated in Asia. Hinduism, Buddhism, Islam and Christianity. They all diffused in the region: Conquest. Voluntary conversion. Migration. Proselytization. Two major religions have their hearths close to Pacific Asia.

5 © Dr. Jean-Paul Rodrigue 1. Religions ■ Religious diversity Simplistically: Buddhism in the north and Islam in the south. The outcome of endogenous and exogenous influences. Hinduism, Buddhism, Islam and Christianity are of external origins: Less the case for Hinduism and Buddhism. Diffused the region under different eras and circumstances. Traditional Chinese (Confucianism) and Shinto: Indigenous religions with adaptations from Buddhism.

6 © Dr. Jean-Paul Rodrigue 1. Religions HinduismBuddhismIslamChristianity Polytheistic; more than 333,000 gods (Devas): Part of Brahman; one ultimate reality. Trinity of Brahma (creator), Vishnu (preserver of good and order) and Shiva (destruction and creation). Reform of Hinduism; a religion, a philosophy, an ideology. Monotheistic religion; “submission to God”. A Muslim is a “believer”. Word of Allah contained in the Koran (recitation). Monotheistic faith: Jesus Christ as the Son of God. The Holy Bible contains the teachings of God, Jesus Christ and His followers. Northern India. Oldest religion. (3, BC); no specific founder. Northern India (563 BC). Siddhartha became the first Buddha, or “Awakened One”. Emerged in Saudi Arabia in the 7th century (Mecca). Emerged in Israel in the 1st Century. Karma: Your deeds, good or bad, will return to you. Reincarnation: You are the sum of numerous past existences. Dharma: Individual ethics, duties and obligations. Four Noble Truths: Suffering is universal and inevitable. The cause of suffering is desire and ignorance. A way to dispel ignorance and relieve suffering; The eightfold path; achieving Nirvana. Five Pillars of Islam: One God (Allah) and Mohammad as His prophet. Prayer five times a day. A month of daytime fasting (Ramadan). Giving of alms. One pilgrimage to Mecca (The Hajj). Salvation is achieved in faith and adherence to the teaching of the Holy Bible. Cast system reflecting one’s position in the ladder. About 1 billion followers (India and Indian communities). Mahayana and Theravada Buddhism. Came through trade. Conversion of local populations. Through missionaries during the colonial era. Spain and Portugal being its strongest advocates.

7 © Dr. Jean-Paul Rodrigue

8 2. Rice ■ Major farming and settlement patterns Swidden in the uplands: Shifting agriculture or “slash and burn”.slash and burn Vegetation is burned to transfer nutrients to the soil. Plots are planted in until soil nutrients are exhausted. Plots are abandoned an vegetation and returns to its original form (takes at least 10 years). Sustainable when populations are small and stable. Rice in the lowlands: Irrigation systems. Fixed large quantities of labor in the countryside. Plantation agriculture: Began with European colonization. Often located on coasts because of the need to transport overseas. Products like rice, rubber, cane sugar, tea, pineapple, and copra.

9 © Dr. Jean-Paul Rodrigue 2. Rice ■ Rice and society Deep economic, cultural and social influence. Why rice in Asia? Rice originates in Southeast Asia. Most productive form of agriculture. Limited amount of flat land. Asia produces about 90% of all the rice in the world: China and India: 50%. Asia’s top 10 produce 86%. Staple food of several cultures: Cultural and religious significance. Many cultures have legends where rice is linked with their creation. Chinese: “she fan” means “to eat” as well as “to eat rice”; “Fan Dian” means “restaurant” is well as a “place where rice is served”. Japanese: “Gohan” means “rice” as well as a “meal”.

10 © Dr. Jean-Paul Rodrigue World’s Largest Rice Producers, 2004

11 © Dr. Jean-Paul Rodrigue Land Suitable for Rice Production, Pacific Asia Irregular water flow; discrepancies in rice cultivation.

12 © Dr. Jean-Paul Rodrigue Share of Agricultural Land Irrigated Storage and distribution of surpluses. Irrigation canals, reservoirs and terrace paddy fields.

13 © Dr. Jean-Paul Rodrigue 2. Rice ■ Paddy fields 85% of all the rice produced in the world is in paddy fields: From the Malay word “padi” which means “rice”. Massive amount of labor required: 1,000 hours of work per hectare. Field preparation, dike mending, transplanting, weeding and harvesting. Terrace paddy fields.Terrace paddy fields Flooded fields enclosed by small walls. Flooded fields Highly productive because nutrients dissolved in water: 5,000 liters of water to produce one kilogram of rice. 50% of paddy fields are irrigated by rainfall. 35% of paddy fields are irrigated artificially. Possibility of 1, 2 or 3 crops of rice per year: Depending of rainfall and temperature. Alternance wheat (winter) and rice (summer / monsoon). Also used as fish ponds.

14 © Dr. Jean-Paul Rodrigue 2. Rice ■ Rice growing cycle 1- Sowing seeds: In small seedbeds (avoid weeds) for about 60 days. Prepare (plow) the fields.plow 2- Transplantation: Hand transplant the seedlings into flooded fields.Hand transplant Rice grains are ready for harvest in 3 to 6 months. 3- Harvest: Dry the field. Harvest rice with sickles or knives, tie it in bundles, and let it dry in the field.Harvest rice 4- Grain preparation: Remove the grain from the plant. Dry the grain.Dry the grain 1 2 3

15 © Dr. Jean-Paul Rodrigue 2. Rice PartUsage Grain Cooked and served with vegetables or meat. Fermented into wine or brewed into beer. Animal feed. Cosmetic powders. Straw Animal feed. Crafted into rope, hats, shoes, etc. Molded in bricks and made into paper. Bran Pressed into oil to make soap and cosmetics. Nutritional additive (fiber). Hull Packing and insulation. Fuel.

16 © Dr. Jean-Paul Rodrigue Population Density and Ecumene Very high density; wet rice cultivation. Limited ecumene (continuously settled area). Distribution along river deltas and irrigated areas. East Asia: Coastal plains. Ethnic homogeneity. Southeast Asia: Separation of communities by mountain ranges. Ethnic diversity. Minorities often living in higher and less fertile locations.

17 © Dr. Jean-Paul Rodrigue Conventional Cycle of Population Growth More labor for rice production Support for population growth Wet rice agriculture Irrigation Cycle High infant mortality rate Preference for sons

18 © Dr. Jean-Paul Rodrigue 3. Demography ■ Altitudinal ethnic stratification Prevalent in Monsoon Asia, especially Southeast Asia. Fertile / flatland occupied by the dominant ethnic group; higher populations. Marginalization increases with altitude; isolation and lower populations. ■ Mekong Lowlands: Vietnamese / Khmer.Khmer Midlands: Lao. Highlands: Hmong.Hmong Lowlands Midlands Highlands

19 © Dr. Jean-Paul Rodrigue Ethnic Composition in East Asia Country90%80%60%40%20%10%5% China Han 55 minorities such as Uygur and Tibetan Japan Japanese Koreas Koreans Taiwan TaiwaneseChineseHakka

20 © Dr. Jean-Paul Rodrigue Ethnic Composition in Southeast Asia Country90%80%60%40%20%10%5% Burma Burmese Karen Shan Chinese Cambodia KhmerVietnamese Indonesia JavaneseSudanese Madurese Chinese Laos Lao LoumLao TheungLao Sung Malaysia MalayChineseIndian Philippines Cebuano Tagalog Iloko Panay- Hiligaynon Bikol Bisaya Chinese Singapore ChineseMalayIndian Thailand ThaiChinese Vietnam Vietnamese Lao Montagnard Chinese

21 © Dr. Jean-Paul Rodrigue 3. Demography ■ Demographic transition Process of demographic growth: Particularly after WWII. Huge increase in population. Demographic growth is slowing down: Significant declines in fertility observed across the board. Economic and social modernization of the region (age of marriage). Various population planning policies. Korea, Taiwan, Singapore, and Hong Kong: Currently experiencing great decreases in their birth rates. Their fertility rates are below replacement rate. South Korea has the lowest fertility in the world (2005). People’s Republic of China: Government policy has lead the way to lower birth rates. Imposed a “One Child Policy” ( ).

22 © Dr. Jean-Paul Rodrigue Demography of the Three Largest Nations of Pacific Asia ( ) (in millions)

23 © Dr. Jean-Paul Rodrigue Fertility Transition in some Asian Countries,

24 © Dr. Jean-Paul Rodrigue Average Age of Marriage, Women,

25 © Dr. Jean-Paul Rodrigue 3. Demography ■ Agriculture and collectivism Asia tends to have a higher degree of collectivism. A major explanatory factor is the intensity of agriculture: Requires cooperative land management, notably irrigation systems. Settlements tend to be nucleated with villages surrounded by fields. Cooperation at its peak during planting and harvesting. This social structure pervades today: The needs of the collectivity surpasses the needs of the individuals. Social order with duties. Most Pacific-Asian countries are still heavily rural.

26 © Dr. Jean-Paul Rodrigue Percentage of Agricultural Population, 2003

27 © Dr. Jean-Paul Rodrigue 3. Demography ■ Role of children A reflection of dominantly rural societies. Multidimensional role: Continuity of the family name (males). A direct link to ancestors. Inheritance of family property, notably farmland. Agricultural labor (in the field by the age of 7 or 8 years). Take care of parents in old age (limited social security). Rural areas tend to have high levels of fertility: Maximizes the chances of having a son and of survival. Daughters are increasingly sent to the cities to work in factories. Child labor: 15% of 7-14 years old work in fields or factories.

28 © Dr. Jean-Paul Rodrigue Percentage of Economically Active Children Aged 7-14

29 © Dr. Jean-Paul Rodrigue 4. Social Problems ■ Gender issues in rural areas Acute gender differences in rural societies. Unequal access to education, health care and employment: 70% of the world’s poor are women. Often not qualified as work in the fields, but as “help”. Women’s products: Small animals of low value (chickens, goats and pigs). Vegetables and roots. For subsistence. Plant, weed and harvest. Man’s products: Large high value animals (horses and cattle). Grains and tree products. For cash. Prepare fields for cultivation.

30 © Dr. Jean-Paul Rodrigue Percentage above 15 years Literate, 2005

31 © Dr. Jean-Paul Rodrigue 4. Social Problems ■ Gender issues in urban areas Majority of recent migrants are women. Left the countryside to work in manufacturing and service industries (particularly in China): Send remittances back home. Often more an asset than the son. Transposition of gender issues in the modern workplace: Even in advanced societies (Japan, Korea). Woman fulfilling clerical functions. Expectation to work until getting married and then assume the traditional child raising function.

32 © Dr. Jean-Paul Rodrigue 4. Social Problems ■ Prostitution Different perspectives in Asian cultures: On average tolerated. Most prostitution is internal. Boomed after World War II: Rising prosperity in developed countries. Development of tourism. Poverty, conflicts and natural disasters. Commodification of sex by the pornography industry. Establishment of American military bases (R&R). Complex networks of abductions, trafficking and bondage (debt): 2 million girls (aged 5 to15) introduced into the sex industry each year. Replace overworked, sick or dead prostitutes. A prostitute gets $10,000-$15,000 of debt to work in Australia.

33 © Dr. Jean-Paul Rodrigue 4. Social Problems The “value” of a prostitute drops with her age. Child prostitution: About 1 million in Asia. 800,000 children working in the sex industry in Thailand. Average age: 10 to 14. “Mail-order bride”: 100,000 – 150,000 women a year advertise themselves for marriage.marriage About 10,000 available on the Internet at any time. Mainly from Southeast Asia and Russia. Come from places in which jobs and educational opportunities for women are scarce and wages are low.

34 © Dr. Jean-Paul Rodrigue Prostitution in Pacific Asia ■ Sex cities Significant infrastructures of bars, karaoke clubs, hotels, and massage parlors. bars Bangkok (2), Manila and Saigon as major destinations. Bangkok2 ■ Sex tourism Mainly Europeans, Americans, Australians, Saudi Arabians and Japanese. Either informal or organized by sex travel agencies. Seek exotic, submissive, obedient woman not contaminated by feminism. Saigon Bangkok Manila Taipei

35 © Dr. Jean-Paul Rodrigue 4. Social Problems ■ Missing female population About 165 million females are missing from Asian population (2005). Normal ratio at birth is about 100 girls to 105 boys. Boys are weaker and the ratio evens out after 5 years. Since 1900 the ratio has been declining, especially after Particularly the case for China and India (0-4 age group): China accounts for about 60 million missing females; India for 25 million. 1990: 110 boys per 100 girls. 1995: 118 boys per 100 girls. 2000: 119 boys per 100 girls. Ratios even higher for second and third child. Problems exacerbated by declining fertility and growing standards of living.

36 © Dr. Jean-Paul Rodrigue Sex Ratio (males per 100 females), 2000 Related to societies where gender inequality prevails (religious and social causes).

37 © Dr. Jean-Paul Rodrigue Infant Mortality Rate (per 1000 under age 5), by Sex, Selected Countries, 2006

38 © Dr. Jean-Paul Rodrigue Missing Female Population, 1998

39 © Dr. Jean-Paul Rodrigue 4. Social Problems ■ Gender roles and the missing female population Sons are perceived as an asset: Farm work. Security for old age (no social security in several countries). Take over the family name. Sons get better health care, food and schooling. 100% of them must find a bride and produce an heir. One of the greatest Confucian sins is not to have male descendants. In China, the birth of a boy is labeled as “big happiness” while the birth of a girl is labeled as “small happiness”. Daughters are perceived as a liability: Marry and leave home to provide labor to another family. Dowries are often to be paid.

40 © Dr. Jean-Paul Rodrigue 4. Social Problems ■ Causes of the missing female population High female mortality in infancy or childhood: Preferential treatment for boys; better food and health care. Infanticide. Excess female mortality in utero: Sex-selective abortion. 500,000 and 750,000 unborn Chinese girls are aborted every year after sex screening. Net out-migration of female children: International adoptions.International adoptions Abandon; Orphanage are strictly populated by girls. Sex-selective undercount of children: Daughters are not declared. No education provided by the state. “Sold” / “rented” as a factory worker, wife or prostitute.

41 © Dr. Jean-Paul Rodrigue Official Adoptions from China to the United States,

42 © Dr. Jean-Paul Rodrigue 4. Social Problems ■ Consequences of the missing female population Demographic “backlash”: May help achieve demographic stability. Fast decline in fertility. Fast decline of population growth and then of absolute population. About 35 million men forced to be bachelors by 2020 (25 million in India); “bare branches”. Social consequences: Limit the advancement of women in society. The “value” of females will increase considerably in the future: Millions of men will not be able to find a wife. Changes in the economics of marriage. Inverted dowry; “Bride prices” are becoming more common (about $4,000 in China). Daughters increasingly an asset for industrial work.

43 © Dr. Jean-Paul Rodrigue 5. Urbanization Natural increase (ongoing demographic transition). Rural to urban migration. Modernization and globalization. Fast urbanization. Mega-citiesMega-cities. ShantytownsShantytowns (2).2 Environmental degradation. CausesConsequences

44 © Dr. Jean-Paul Rodrigue Cities of More than 10 Million Inhabitants, 2007

45 © Dr. Jean-Paul Rodrigue B. PACIFIC ASIAN DEVELOPMENT 1. From Ashes to Riches How does Pacific Asia compares economically with other regions of the world, now and then? 2. Development Factors What were the major reasons behind the success of many Pacific Asian countries? 3. Development Problems What are some specific development problems the region is facing?

46 © Dr. Jean-Paul Rodrigue 1. From Ashes to Riches ■ Geopolitical instability Around 1950, Pacific Asia was in ruins with limited development prospects. Almost the whole continent was at war, revolution or under famine between 1930 and ■ China: A Difficult Start Wars: 20 million Chinese killed during the war with Japan ( ) and the civil wars ( ; ). China tried to invade Vietnam in China - USSR border clashes ( ). Demagogy: 40 million died of starvation during the “Great Leap Forward” ( ). Around 10 million killed during the Cultural Revolution ( ).

47 © Dr. Jean-Paul Rodrigue 1. From Ashes to Riches ■ Southeast Asia Indochina War ( ): Involved guerrilla between Communists and non-Communists, including France and the United States. France pulled out in United States pulled out in Hundred of thousands of refugees. Indonesia: Invasion of East Timor in Ethnic clashes: –Around 500,000 ethnic Chinese were killed in 1965 during a failed coup in Indonesia. Genocide: About 1 million Cambodians (15-20% of the population) were killed by the Khmers Rouges between 1975 and 1978.

48 © Dr. Jean-Paul Rodrigue 1. From Ashes to Riches ■ Regional conditions (1960) Low levels of development: Limited infrastructures (WWII, Civil/Liberation Wars, Colonialism). Political instability (e.g. Cold War). Low educational levels. Limited capital. Comparisons: Africa might have been better off than Pacific Asia. Japan had income 1/8 of the US. South Korea and Taiwan as poor as Sudan and Zaire (DR Congo). China was three times poorer than Taiwan. Hong Kong was a struggling, cheap labor-oriented colony facing massive influxes of refugees from China.

49 © Dr. Jean-Paul Rodrigue 1. From Ashes to Riches ■ Accelerated development From the 1950s, economic development accelerated: Led to the biggest accumulation of wealth in human history. Fastest rise in incomes for the largest number of people ever recorded. Labeled “The Asian Miracle” by the World Bank. Between 1970 and 1990: Number of very poor persons fell from 400 million to 180 million in East Asia. Population climbed by 425 million. Around 650 million people escaped poverty. Africa failed: Its combined GDP in 2000 was less than Switzerland.

50 © Dr. Jean-Paul Rodrigue 1. From Ashes to Riches ■ Waves of Pacific Asian Development First Wave, 1950s (Japan). Second Wave, 1960s (The Four Dragons). Third Wave, 1970s (Malaysia, Thailand, China and Indonesia). Fourth Wave, 1980s (The Philippines and Vietnam). Fifth Wave, 1990s (Growth and recession). ■ China reclaiming its historical share 25-30% of global GDP Japan WWII Korean War Four Dragons Great Leap Forward Vietnam War Cultural Rev. China, Malay., Thai., Indo. Philippines, Vietnam AFTA Asian Crisis China joins WTO

51 © Dr. Jean-Paul Rodrigue Industrial Revolution and Time to Double National Income

52 © Dr. Jean-Paul Rodrigue World GDP, 1AD

53 © Dr. Jean-Paul Rodrigue World Nominal GDP, 2009 ($US)

54 © Dr. Jean-Paul Rodrigue 2. Development Factors ■ United States Initial role: Marshall Plan also applied in Asia after WWII. South Korea and Taiwan would not have survived without the support of the United States. Between 5 and 10% of the GDP in foreign aid in the 1950s. Direct aid ended at the beginning of the 1960s. Freed internal financial capacity and promoted savings. Contemporary role: The United States has become an important market for Asian products. Supporting of the export-oriented development.

55 © Dr. Jean-Paul Rodrigue 2. Development Factors ■ High savings rates Related to the availability of local investment capital. Savings were preferred over consumption. Ranges around 20 to 30% of GDP. Many societies offer little if any social security: Responsibility of the individual / family to cover expanses such as health care, education and retirement. Government mandatory saving and insurance policies. The average American has an income of about $40,000 a year: The personal savings rate is about 1% (negative in 2006). The average Chinese earns around $1,500 per year: The personal savings of 45% of his income. A poor Chinese saves more than a wealthy American.

56 © Dr. Jean-Paul Rodrigue Personal Savings Rate, United States and China

57 © Dr. Jean-Paul Rodrigue National Savings Rates (as % of GDP), 2001

58 © Dr. Jean-Paul Rodrigue 2. Development Factors ■ Abundance of labor Numbers do not guarantee industrialization, but an advantage in labor intensive activities. Demographic growth helped maintain low labor costs: Exports are more competitive. Foreign investment is attracted. Productivity often grows faster than wages. Usage of women labor: In the manufacturing sector. Notably years old. Often account between 40 and 50% of labor. Lower wages and more disciplined.

59 © Dr. Jean-Paul Rodrigue Hourly Compensation in Manufacturing, 2004 ($US)

60 © Dr. Jean-Paul Rodrigue 2. Development Factors ■ Globalization Development models vary greatly in the region. Diversity of economic and political systems. Convergence towards the capitalist model. Pacific Asia took advantage of the emerging global economy: Opening of foreign markets. Liberalization of trade. Export-oriented development. Significant improvements in the welfare of the population. Development of international transportation: Pacific Asia accessible a lower costs. Containerization.

61 © Dr. Jean-Paul Rodrigue Share of World Goods Exports, Selected Countries,

62 © Dr. Jean-Paul Rodrigue 2. Development Factors ■ Foreign Direct Investments (FDI) Capital investments by foreign interests (mostly private). Related to the speed of development. Massive transfers of technology and investment. FDI are mostly undertaken as joint-ventures: The foreign firm often provides capital and technology. The Asian firm provides labor and raw materials. About 60% of FDIs are occurring in the manufacturing sector. United States and Japan: Account for more than 50% of FDIs. Japan massively investing in China; lower production costs. China accounts for 50% of all FDIs going to developing countries.

63 © Dr. Jean-Paul Rodrigue Value of Chinese Exports and Received FDI, (Billions of $US)

64 © Dr. Jean-Paul Rodrigue 2. Development Factors ■ Sub-contracting High production / labor costs in developed countries: Corporations looking at ways to reduce costs and compete. A increasing share of production is done by sub-contracting. Transfer of a manufacturing process. ■ Technology transfers Mostly done by licensing (Taiwan, South Korea): A firm has the authorization to use a technology. Pays a royalty. Several technologies “stolen”. Software and industrial process piracy. Asian countries have become innovators: Japan and the Tigers first. China: substantial potential for innovation.

65 © Dr. Jean-Paul Rodrigue IT Industry Competitiveness Index, 2007

66 © Dr. Jean-Paul Rodrigue Value of an iPhone 3G Components and Labor, 2009

67 © Dr. Jean-Paul Rodrigue 2. Development Factors ■ Government and industrial development Asian governments tend to be of small size: Lower taxation on the society; less social safety nets. Notable exceptions; China, Vietnam. Often account for less than 20% of GDP (about 45-50% for the US). Involvement of the government: Defines the strategic orientation of the economy; Favor export-oriented strategies. Developing projects and providing financing (preferential loans). Favor trade-related infrastructure projects. Significant regulatory involvement (misallocations and some corruption). Special economic zones: Enclave where foreign corporations are given specific privileges (mainly taxation). Attract foreign investments, new industrial activities and technologies. Hong Kong is a free trade zone since 1841.

68 © Dr. Jean-Paul Rodrigue 2. Development Factors ■ Confucianism Important imprint in most Pacific Asian societies. Basis of most social structures, especially in the Chinese world. Main values: Hard work as a symbol of achievement. Thriftiness. Obedience to authority and respect of hierarchy. Benevolent leadership. Consensus, harmony and common interest. Education as a tool of social promotion. Possible to make accept difficult living conditions to justify future development. Its importance is argued.

69 © Dr. Jean-Paul Rodrigue Development Factors (Synopsis) Factor United States Initial role (1950s). Marshall Plan. Financial support. Military protection (Japan, South Korea, Taiwan). Major market outlet. Savings High saving rates (about 30% of GDP). Availability of national capital. Labor Large labor pool. Wages kept relatively low. Reliance on women. Development of skills through education. Globalization Increased participation to international trade. Lower tariffs. Lower transport costs. Foreign direct investments Transfers of production and manufacturing capacities. Mainly from Japan and the United States. Joint ventures. Transfer of technology. Sub-contracting Access to foreign markets. Government Special economic zones. Export-oriented development strategies. Mandatory savings. Confucianism Social order. Work ethics. Consensus. Respect of authority. Its role is argued.

70 © Dr. Jean-Paul Rodrigue 3. Development Problems ■ Questioning the “Asian Miracle” Used to be called “Miracle Economies” by the World Bank. Two crisis: Financial crisis of Financial crisis of ■ The Asian Financial crisis of The bursting of a bubble, mainly based on real estate. Exacerbation of social problems. Inequalities. Loss of spending power. Especially true in countries depending on imports (Indonesia). Political unrest (fall of the Suharto government in 1998).

71 © Dr. Jean-Paul Rodrigue 3. Development Problems ■ The role of governments Governments regulate massively their economy: Industrial control; the appeal of an export-oriented strategy. Preferential loans. Informal “Black” market: Avoid government regulation creating artificial scarcity. Corruption: Where there is government there are misallocations. Corruption is a form of misallocation (using public power to regulate, coerce and confiscate). Corruption becomes a source of income for low paid bureaucrats. Cronyism (favoritism shown to friends and associates). Lack of transparency. “Hidden clauses” often account for up to 30% of the amount of a contract. Weak legal systems leaving limited recourse. Institutions did not develop with the economy.

72 © Dr. Jean-Paul Rodrigue Corruption Perception Index, Selected Countries, 2006 (10 = the least corrupt)

73 © Dr. Jean-Paul Rodrigue 3. Development Problems ■ The currency leverage game ( ) Systematic positive export balance: Increase of the value of a national currency. Eventually exports slow down has they become more expensive. Asian currencies should have increased substantially. Maintaining the exports: Continue the export-oriented system. Japan and Korea bought large amounts of US securities to recycle their foreign reserves (T-bills, bonds, stocks, etc.). China pegged its currency (Yuan) to the US dollar at 8.2 and also purchased US securities. Inflated US assets (housing) and kept consumers buying. Transfer of wealth from the West to the East.

74 © Dr. Jean-Paul Rodrigue Yuan Exchange Rate (per USD), (Monthly) Discount Window Export Oriented Debasement Closing of the Discount Window

75 © Dr. Jean-Paul Rodrigue Ownership of US Treasury Bills, 2010 $13,562 billions (Sept. 2010)

76 © Dr. Jean-Paul Rodrigue Major Foreign Holders of U.S. Treasury Securities, 2008

77 © Dr. Jean-Paul Rodrigue 3. Development Problems ■ The limits of the export-oriented model Pacific Asian development strongly dependent on exports to North American and European markets: A form of “neo-mercantilism”. Correlated (“coupled”) with the dynamics of these markets. Decoupling thesis: Development of an internal market. Less dependency with North America and Europe. A business cycle with a large bust phase that began in 2008: Sharp drop in exports (China, Korea and Japan). The decoupling thesis turned out to be inaccurate. The export-oriented model is being questioned.


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